Pedicure picture from Shutterstock Enterprise resource planning (ERP) software has all the sex appeal of an infected toenail, and is considerably more difficult to manage. Cloud technology is improving ERP, but it's a very slow process. Here are five questions to ask to help speed the transformation.
ERP software is something every business needs — an accurate system of record for transactions, inventory and resource utilisation — but which absolutely no-one enjoys. It's expensive, it's clunky and it's a pain to manage. "The vast majority of our IT budgets are going to support this thing and we're not getting a lot of return on investment," Gartner analyst Denise Ganly said in a presentation on ERP trends at Gartner Symposium/ITxpo.
The ERP scene is still dominated by on-premises providers who provide "megasuites" of software, with mega-licensing and maintenance fees to match. The top 10 players account for 65 per cent of the market, with SAP, Oracle and Sage leading the pack.
That, however, is slowly changing, Ganly said. Single-purpose cloud-based ERP systems are gradually becoming more popular, and are growing much more quickly than the incumbents. "In 2007 we started to see a major revolt. ERP fees were too high. What we're seeing today is a scaling back of the monolith."
"Rather than going to Oracle for specialist HCM capabilities, we're getting Workday in instead," Ganly said. "Cloud specialist vendors are more functionally rich and the megavendors simply can't keep up with that. No vendor can build fast enough."
Shifting to cloud systems also helps deal with one of conventional ERPs biggest pain points: it's almost impossible to do anything innovative with it. "Current thinking about ERP traps us into thinking about innovation in an old-fashioned way," Ganly said. "It's about 'how to do a process more efficiently', not 'how to do a process differently'.
The main pain point is data integration, which is a problem whether you're using an on-premises solution or trying to switch to the cloud. "Just because it's in the cloud is doesn't mean it's integrated and everyone talks to each other," Ganly pointed out. "No one has sprinkled magic fairy dust. We are going to have significant integration complexities moving forward."
"Your core needs to be simple and stable. Where the nice fun stuff comes in is with the loosely coupled applications."
There's also likely to be resistance to change from your financial systems operators, but that isn't necessarily a problem. "The users that like the stability and the familiarity of the existing ERP are the ones that use it every single day. That's not the stuff that you tend to send to the cloud."
Ganly recommended these five questions as the basis for planning a gradual evolution of ERP systems:
- Where are you now — really?
- What renovation does your core ERP need, and how fast can you achieve it?
- What drivers and constraints are there?
- How will your business re-imagine processes
- Which scenario fits your digital business model — and when?
Making those changes won't be easy. On the other hand, how many more overpriced maintenance contracts do you want to be forced to sign?
Throughout this week, Lifehacker is covering Gartner Symposium/ITxpo 2014 live from the Gold Coast, bringing you practical tips and advice for running business IT more effectively.
Check out all our stories from the event.